Heartbreak Hotel

Face it, Hollywood. Compared with the other beaches that line the South Florida coast, you're the ugly duckling.

Your beachfront condos look like military barracks. Your shops are all chipped paint, faded awnings, and kitsch merchandise. Hell, even your sunbathers are eyesores  oblivious, it seems, to The South Beach Diettm forbidding carbs.

But don't fret. What you lack in good looks you make up for in character. On a coastline fast becoming uniform, yours is the only one that has been spared the inevitable row of high-rise condos, insufferably trendy bars, and $40-a-plate restaurants.

Unpopularity has its virtues. Hollywood Beach allows a person to drive  and park!  within 50 yards of the sand. It has the singular quality of being affordable: For $20, you and a friend can have a decent meal. And on the Hollywood Broadwalk, you won't run into the fashionable and tragically wealthy. Everyone's free to chill  and isn't that what beaches are for?

Yes, these are special qualities, essential not just because Hollywood Beach should rightly have its own identity but because South Florida ought to offer variety in beach experiences. So although it might be tempting for some to give the area an extreme makeover, no redevelopment plan should detract from Hollywood Beach's novel unchic.

One of the most important bulwarks against a needless transformation of Hollywood into another Sunny Isles has been the coastline's first line of defense: the small, inexpensive beach motels that have so far held back a wave of sprawling, upscale resorts and condo megatowers. Placed on small parcels that divide beach property into a crazy quilt of land lots, the small motels present a huge headache for developers hoping to assemble enough acreage for a major project. And city codes place limits on the height and density of buildings in the central and north portions of the beach.

But now, a tsunami of new pressures is coming at motel owners that threatens to wipe away the village pace of life on Hollywood Beach. As one of the few remaining strips of underdeveloped coastline, the land has appreciated dramatically, doubling and tripling the cost of property taxes in the past year alone. The hurricanes of 2005 had a similar multiplying effect on insurance rates. And small inns don't have enough rooms to generate the kind of revenue they need to keep pace with rising operating expenses.

The only thing holding back a total onslaught of new development, it seems, is the crappy housing market itself, which is making developers think twice about adding to the glut of new condos until prices start heading up again. But after an abysmal 2006, the housing market is showing signs of a rebound. Another boom may be around the corner. And with pie-in-the-sky downtown development projects like the Hollywood Arts District and Tango Gardens failing, city officials will be searching for new sources of tax revenue  finding them, perhaps, through high-rise, high-density buildings on the beach.

Some motel owners are standing firm. Others know the game is up and are bailing out. And real estate agents, naturally, are swirling like sharks, smelling blood in the water. One agent expressed mild shock when, in a conversation, New Times wondered how land values could keep skyrocketing under decades-old motels, some dramatically showing their age. The agent tried to clue us in.

"They'll all be gone in five years," she said.

She may be right.

In 2003, Liz Woods, a nurse, sold her home health care business in chilly La Crosse, Wisconsin, and headed to Hollywood Beach. With the $350,000 that was her life's savings, Woods bought the Sun & Surf, an 18-room motel on Indiana Street. It was "run-down" and "roach-infested," Woods says, but with a $150,000 line of credit, she and her fiance, Kevin, figured they could fix up the place.

To save money, the couple did most of the renovation work themselves, and since they could generate income only after completing the project, they toiled long hours. "We crawled home at 10 or 11 at night," Woods says. "Then we were back here at 8 a.m. That was our life for nine months."

The motel attracted middle-class tourists from the Northeast, Canada, and Europe who appreciated the weekly rates of around $500 and fully furnished kitchens where they could cook their own meals.

In her first year, Woods appeared to be another success story on the one South Florida beach that has a tradition of rewarding middle-class investors.

But long before the hurricanes made landfall, an unnatural disaster loomed: the Hollywood Grande's arrival next door.

Originally, developer Fabrizio Passalacqua's plan called for 145 hotel rooms along Ocean Drive. Then he revised it, adding condos and height to his project. The new design would have 226 units in buildings that would reach 91 feet, casting Woods' small hotel into shadows.

Before Passalacqua could make those changes to his plans, however, he'd have to get approval for the new units from Hollywood officials. To help his case, Passalacqua courted the endorsements of adjacent property owners, like Woods. It was a hard sell  construction on the site seemed sure to drive the Sun & Surf out of business. But Passalacqua offered to buy the small hotel for $2.24 million, a price that included the cost of a condo in the Hollywood Grande, which would be Woods' new home.

Woods had already developed a sentimental attachment to her motel, but she knew that she couldn't fight Passalacqua. Besides, his terms were generous. Better to cut her losses and go along with him.

In August 2004, Woods signed a contract to sell the Sun & Surf to Passalacqua's development firm. That same year, at Passalacqua's request, Woods went to City Hall to declare her support for the Hollywood Grande. The developer had cut similar deals with other adjacent landowners. "He wanted everybody to speak for him, which we did," Woods says. Ultimately, it helped Passalacqua get approval to increase the size and scale of his project.

But Woods says the developer was slow to hold up his end of the bargain. The deadline for the first payment to Woods came and went. Passalacqua's lawyer told Woods' lawyer the developer wouldn't be purchasing the property after all. (Passalacqua declined interview requests from New Times.)

Today, between the Hollywood Grande site and the new sewer and water lines being installed to accommodate it, the Sun & Surf is surrounded by construction. Dirt gets through the windows and under the bedsheets. Jackhammers shake the walls. Guests from overseas have arrived only to cancel their reservations. Says Woods: "I can't very well tell them they shouldn't."

Last year, the Sun & Surf was full from November through April. This year, during such peak periods as New Year's Eve, the motel's 18 rooms have been empty. Soon, the Sun & Surf will go out of business  and Woods wonders whether this was all part of Passalacqua's plan: "He's waiting to sweep in like a vulture and pick the bones clean as soon as we fall down."

Woods is considering a suit against Passalacqua, but she can hardly afford the attorney's retainer. Besides, her first concern is saving her property from foreclosure, which at the moment seems imminent.

Few Hollywood Beach motel owners face as dire a predicament as Woods, but it's hard to imagine the scenario not repeating itself as land prices continue to rise. Woods won't be the last to be driven out by new development.

"I always thought that if you do things the right way, do the best you can for other people... ," Woods says, but her voice trails off, embarrassed, perhaps, by how naive she sounds.

Over the more than 40 years that Dori Lynn Neuwirth's family has run the Atlantic Sands on Hayes Street, the motel has attracted a devoted pack of seasonal regulars. Some of those regulars even time their vacations so they can meet up every year with the same visitors coming from different parts of the world.

The Atlantic Sands is not close to any ongoing developments, but Neuwirth is still feeling the weight of high property taxes. With only seven units in her one-story building, it's hard for Neuwirth to raise enough revenue to turn a profit. So before last season, she e-mailed her regulars to inform them that she was increasing the room rates from $725 per week to $825. It didn't go over well.

"My February group called me out for a sitdown," she says, laughing. "They said to me, 'How could you do this? We're like family. '"

The Atlantic Sands could, like many well-maintained motels on Hollywood Beach, raise its rates and still fill its rooms, but that would mean targeting customers who occupy loftier income brackets, which is not part of Neuwirth's agenda. "I want to continue being what we are," she says. "I like having Middle America working people come stay with us. I don't want to price myself out of my current market. It's heartbreaking when you have somebody who loves the place and they say 'We won't be able to stay there this year because we can't afford it. '"

Neuwirth's dilemma appears to be the most common among motel operators. Peter Boulahanis, owner of the Beach Crest Motel and Apartments on Ocean Drive at Virginia Street, says his taxes have tripled in one year. Like Neuwirth, he responded by raising rates, and it too has slowed business. This year, he has 11 unoccupied rooms, compared to just four at this time last year. In the 30 years he's lived on the beach, he says it's never been tougher financially.

For 15 years, Donna Boucher has owned the Manta Ray Inn on Surf Road near Foxglove Terrace, and in the past year, she's seen a 102 percent increase in property taxes. Her assessment was high because it's based on the appraiser's definition of the property's "best use," which is a building taller than the Manta Ray's two stories and filled with condos. For Boucher, the "best use" is exactly what it is. "We just want to run a small inn," she says.

Steve Welsch, who manages the DeSoto Oceanview Inn and Ocean Spray on DeSoto Street on the beach's north end, says that this will likely be the first year that the two inns failed to make a profit, thanks to dramatic increases in operating costs. Welsch, though, sees a silver lining: Maybe these trying times will drive the poorly managed motels out of business, and if his inns can stay afloat just a few more years, they'll see a windfall of profits.

"You have two types of hotel owners," Welsch explains. "You have the types who won't reinvest in their hotels, and [in the current market] they will have the hardest time, because people won't pay $200 to stay in a place that has dirty linens and stained furniture and sagging mattresses when the hotel should be charging $50 a night."

Welsch suspects that rundown joints have no agenda except sitting on property until a developer approaches with a handsome offer. Until that day, there's little incentive for a motel owner hoping to cash in to make improvements. Which explains the more dilapidated lodgings on the beach.

"Then you have operators who want to make a living and improve the properties," Welsch says. He puts the DeSoto inns in this category. "We have put a good deal of investment into our properties, and we're in it for the long haul. We have appreciated in beauty, in charm, due to the investments we've made. Those investments were not made to make it more attractive to a developer."

The motel owners who have put off improvements because they intend to sell are sheepish about admitting it. When asked whether the owner of an eyesore on the beach's south end had been approached by developers, the manager smiles broadly: "No, but he's waiting for that day."

Reached at his Miami phone number, the owner says he'll sell "when the price is right." But he denies that this has caused him to be lax in maintaining the property.

Conceivably, the innkeepers who want to weather economic forces so they can stay could form a political action committee and lobby for public policies that might save them. It's Neuwirth's belief, for instance, that motels like hers are an "endangered species" and that, if city and state officials really want variety on South Florida beaches, small motels are entitled to some special environmental protection.

But since the small operators have all had to trim expenses, they've taken on more housekeeping and bookkeeping work themselves, leaving less time for political activism.

And there may be more subtle forces at work. Even the inns that are immaculately maintained may be tempted to cut their losses and sell at the first generous offer. In that climate of suspicion, solidarity is elusive.

"It's hard to tell who really wants to be here," Neuwirth says. "I think we're few and far between. If we were a unified group of small property owners who wanted to stay here, we probably would be organized and have more clout to get what we wanted, but I don't think that's the case."

To see an ocean disappear, head south on Hollywood Beach's Broadwalk. It's the one enduring, egalitarian stretch of South Florida beach; but as the Broadwalk crosses Georgia Street, it turns almost imperceptibly west, ducking behind hedges and then motels to connect with Surf Road for several blocks until finally it crosses Iris Lane and runs smack into a condominium wall. Egalitarianism has to end somewhere.

From here, the privileged are invited to the gleaming lobbies of high-rises like the Ocean Palms and the Diplomat, where condos and hotel rooms afford panoramic views of the ocean.

The unprivileged are invited to play in traffic. Relegated to Ocean Drive, joggers suddenly find the sidewalk so narrow that they must dip into traffic lanes to pass walkers. The rising sun vanishes behind the row of towers, and the sea is gone  concealed behind the imposing façades, accessible only through the back patios of the luxury high-rises.

Inside those buildings, one suddenly feels very far from Hollywood. The "grand entry foyer" of the Ocean Palms is all black marble, and the mirrors hanging on the wall are as big as the pools in Hollywood Beach's small motels. The Ocean Palms' own pool, which is flanked by a tennis court and surrounded by dozens of fountains and 20 private cabanas, is somehow waveless on a windy day, with water that assumes the color of champagne, flowing into a whirlpool that during high tide seems to hover over the surf.

Every one of the high-rise's 240 units boasts a view of both the ocean and the Intracoastal Waterway. All were sold in 2003 and 2004, before the South Florida housing bubble burst.

The showers are made of marble, the cabinetry is Snaidero Italian, the refrigerators all Cohler Sub-Zero. From a 15th-floor suite, called "The Atlantic," the ocean's expanse seems to fill more than 180 degrees of the horizon. For about $5 million, you can find out whether the 40th-floor penthouse affords a view of the Bahamas.

Because city codes restrict the number of residential units that can be built per acre of real estate, high-rises built in Hollywood's near future probably won't have as many condos as the Ocean Palms, nor will they likely go as high as its 40 stories.

But in terms of style, the new generation of Hollywood Beach development will more closely resemble the Ocean Palms than the Atlantic Sands. "The people that own single-story motels or two-story motels will never sell at a price that will make two- to four-story development viable," says Scott Roth, a spokesman for Ocean Palms. "It will have to be ten- to 20-story buildings  at a minimum."

Just to the south of the Ocean Palms, a fenced-in lot belongs to Trump Hollywood, a project with plans for 40 stories and 200 condo units. The fence declares "Hollywood Redefined," and there's truth in that advertising.

"Finally, what we saw the last few years in Sunny Isles and Hallandale Beach  it's creeping north," says Sonia Figueroa, a vice president at Miami-based Related Group, a partner in Trump Hollywood. She doesn't seem to realize that this trend is not universally embraced, that it fills many observers with dread.

The Trump Hollywood advertisements are marketing a city not for what it it is but for what it can be. The sales website, for instance, calls Hollywood a "European-style getaway," which even in the hyperbole common to condo marketers is a stretch. But Figueroa insists her development is living in the present.

"It's not that it's going to happen in two years," Figueroa says of the Hollywood renaissance. "It's happening right now. You're seeing it in the cars that are driving around."

Indeed, traffic on Hollywood's south beach is beginning to look like that of Miami's South Beach  at least in the preponderance of luxury cars. But Hollywood's downtown still has plenty of vacant storefronts. And it remains to be seen whether the Trump Hollywood resident  who can afford condos ranging from $2 million to $4 million  will shop and dine near Young Circle or drive the extra ten minutes to Bal Harbor or 20 to Miami Beach.

In the north and central portions of Hollywood Beach, development has been slowed by height restrictions, but recent decisions by the City Commission suggest that in their battle against existing condo owners and small motels, momentum belongs to developers.

The projects now arriving on those portions of Hollywood Beach are not skyscrapers, but what they lack in height, they make up for in space or density.

The Villas of Positano, which will reach just 130 feet at the highest point, occupies a three-and-a-half-acre footprint on the northernmost section of beach, near Ocean Boulevard's intersection with Sheridan Street. That project, which has just 62 residential units, will complete its first phase of construction in a few months.

"We've been sensitive to the community, the neighbors on the beach," says Lon Tabatchnick, the developer. "We have a very good working relationship with them."

But go next door and one hears a different story. "A complete nightmare" is how Scott Rivelli, a partner in the neighboring Ocean Inn, describes the past few years. He credits Tabatchnick for making personal visits and for apologizing when the contractors are pouring cement at 2 a.m. or core-drilling at 5 a.m., but actions speak louder than words. "They live by the attitude that it's easier to say 'I'm sorry' than it is to get permission," Rivelli says.

The construction puts Rivelli's motel squarely in a losing financial equation: "I can't raise [room] rates more than 2 to 3 percent, while costs have gone up by 40 percent and my revenue is down by 20 percent."

Last July, the city inked a development agreement for the Marriott Ocean Villages, a 320- to 350-room luxury hotel in central beach where Johnson Street meets the Broadwalk. The project calls for upscale restaurants and shops  and the expressed hope among city officials is that these will bring more of the same.

A few blocks south, the Hollywood Grande will add more traffic  all 226 units come with a parking space. And its buildings will add another obstacle to the ocean view of existing condo owners.

Some existing residents actually lose their parking spots. At the Villas on the Circle, an aqua-green, single-story condo directly across Fillmore Street from the development, a longtime resident is furious that despite his years of paying property taxes in Hollywood, his condo must forfeit parking places to accommodate the five spots of valet parking, the loading zone, and the taxicab stand awarded to the Hollywood Grande in its development agreement with the city. "They're giving everything to the developer, and we have no place to park," fumes the resident, who refused to give his name for fear the city would punish him.

The Hollywood Grande will also be taking parking spots formerly used by guests at the Sun & Surf as well as two other adjacent motels, the Swan and the Mermaid.

But since the Hollywood Grande's construction seems destined to drive those motels out of business, parking spots are the least of their worries. Eileen Miller, who owns the Swan and the Mermaid, has gone to commission meetings and hounded city officials, with little to show for it. She's livid. "They treat us like dirt. We've been paying property tax for 27 years, and suddenly a developer comes along and we're the garbage they kick to the curb."

In January, Miller and her neighbor at the Sun & Surf, Liz Woods, were both summoned to individual meetings with Gil Martinez, director of the Hollywood Beach Community Redevelopment Agency, formed for the purpose of using tax-increment financing to spur economic growth on the beach. Miller and Woods each held out hope that Martinez would concede that the Hollywood Grande was driving their motels out of business, and since the CRA helped bring that project to the beach, the CRA would buy out the motels at fair-market value.

Instead, Martinez pitched them on the city's Hotel Improvement Plan, through which the city would match one dollar to every two dollars that a hotel owner put toward renovating his building. But Miller can point to cracks that have sprung in the building's foundation since the Hollywood Grande started driving home its pilings, and all of the windows are lined with the dirt that goes airborne from the construction site. Miller asks, "Why would I paint this place when they're covering it in dust and filth?"

Woods, like many other small-motel operators, doesn't have money for the city to match  even if she thought improvements could save the Sun & Surf. And since she's defaulting on her existing loans, she can't exactly approach the bank for new ones.

At the moment, Hollywood Beach finds itself locked in a stalemate. Motel owners are just one among several groups fighting among themselves, each convinced that it's getting screwed worst.

Business owners grumble about how the Broadwalk improvements and construction on east-west streets has slowed business at the same time as they've seen their property taxes and insurance rates go way up. The new developments on the beach have put more strain on the area's infrastructure, but since the CRA has been collecting all the new tax revenue generated since its creation ten years ago, businesses haven't seen the upgrades in infrastructure that usually accompany new development.

For these reasons, businesses consider it an outrage for the city to expect them to pay for half the costs of "undergrounding" utilities, a measure that would protect against hurricanes but at considerable cost  $3,000 to $50,000 per beach address. All this at a time when, to existing businesses, it appears that incoming businesses get whatever they ask for.

"We've been forgotten," says Audrey Joynt, a board member for the Hollywood Beach Business Association. "And so to turn around and say, 'You need to spend 50 percent of undergrounding of utilities,' that's crazy!"

Condo owners of Hollywood Beach are waging battles on multiple fronts. Facing high costs not just for taxes and insurance but for the maintenance of their buildings, residents are rushing to put their units on the market. Only they're finding stingy buyers. Paul Pop, of Beachfront Commercial Realty, is trying to unload three condos at 1500 S. Ocean. "Most of the people calling are expecting sellers to just give their units away. They talk about, 'the bubble, the bubble, the bubble,' but nobody is really buying, and nobody is really selling."

The situation is particularly stressful for condo owners like Marion Reed, a resident of the Crystal Towers, who lives on a fixed income. She has interrupted her retirement to take office jobs and to work as a teller at Gulfstream Park. "We take any work we can find to get us over the hurdle," Reed says of her fellow retired condo owners.

But unlike motel owners, the condo owners have time to organize. They've been vocal critics of city efforts to bring luxury high-rises and midrises to the beach, and they've succeeded  to the consternation of developers.

Condo owners at the Quadomain persuaded Hollywood officials to pass an ordinance effectively blocking a 19-story condo development in south beach, on the site of the former Driftwood Motel. The same ordinance was the basis for denying building permits to another south beach development by Luis Stabinski, owner of what used to be the Greenbriar Beach Club, a 47-unit motel complex that took severe damage from the hurricanes and that Stabinski now wants to turn into a 15- to 19-story condo.

The DuPont family of Massachusetts, developers of the Driftwood site, filed suit against the city in 2003, and last month, Stabinski joined that suit. Stabinski, an attorney, says that the law and the market are both on his side, even if the condo owners are not. "They can stop it for six months or for two years, but they can't stop it forever," he says. "It's the force of economics."

City officials aren't in any position to referee this battle royale. The pro-development consensus that Mayor Mara Giulianti enjoyed a year ago has crumbled, with Commissioners Sal Oliveri and Cathy Anderson having suddenly joined Commissioner Peter Bober in being skeptical of every developer who would promise a glossy new building in exchange for a few incentives and a bending of the zoning rules.

And the CRA is in particular flux, especially since last month, when Bober and Anderson announced their intentions to scale back the CRA's freedom to spend tax money and to force its private negotiations with developers into the open.

For the past 32 years, Hollywood Beach has been the province of Commissioner Cathy Anderson, who this March may face her toughest reelection campaign yet.

Anderson knows all about the predicaments faced by Miller and Woods. When pressed, she can offer no suggestion other than the Hotel Improvement Plan. As to other motel owners who are being driven out of business by high taxes and insurance rates, Anderson sounds an optimistic note: "I don't think they'll go up that much next year," she says. "Insurance and taxes have reached a plateau."

Anderson can offer no specifics about city policies that would attract smart growth to Hollywood Beach  she recommends asking the CRA's Martinez those questions.

But Martinez cancels an interview at the last minute, then ignores a list of questions sent by e-mail. Instead, he writes a letter full of platitudes about the importance of maintaining the village-like atmosphere of Hollywood Beach but offering no specific ideas on how that can be accomplished, given the complexity of market forces. Nor is he able to reconcile that sentiment with his agency's established pattern of giving precedent to developers in instances like the Hollywood Grande.

No, the person most qualified to grasp the nuances of Hollywood Beach redevelopment would seem to be architect Bernard Zyskovich, who was hired by the city to draft a plan that would keep the best features of the beach and bring new ones. However, Zyskovich's public responsibilities would seem to put him in conflict with his private business as a paid consultant for developers who broker deals with city commissions. He wouldn't return calls either.

Giulianti has, more than anyone else, nurtured Hollywood's reputation for coddling developers, and she has her own interests in the changing beach scene: She recently purchased a unit in the Villas of Positano. But Giulianti has a stormy relationship with the media. In her most recent "Facets of the Diamond" column, published in the South Florida Sun Times, Giulianti asked residents to ignore all media  except the Sun Times.

She was not inclined to grant interview requests to New Times. "We have all seen how you cover the issues," she wrote in an e-mail. "So there's no reason to try giving you the facts."

Bober, Giulianti's opponent in the March 2008 mayoral election, was a bit more voluble.

"I do believe the mayor, in her quest to make the beach a luxurious place, is out of touch with the average small-business owner on the beach and the average resident," Bober says. "Hollywood Beach has always been a place for everybody. The last thing we want people to believe is that it's only for the wealthy."

But Bober adds that keeping alive the tradition of small motels is something that must be addressed at the state level. "The real relief is going to have to come from the Legislature. The small lodges are hurting from taxes. The problem is so pervasive, the Legislature will have to do something meaningful."

What that "something" is, Bober couldn't say. Nor could a powerful member of that Legislature, Sen. Steve Geller.

In the Legislature's January special session, which ended January 19, Geller and other lawmakers focused entirely on the issue of cutting insurance rates, which they did, by 10 to 30 percent. "Unfortunately, there wasn't much we could do about the [property tax] affordability issue," Geller admits.

He blames much of the current crisis on Save Our Homes, the 1992 constitutional amendment that capped annual property tax rates at 3 percent for homesteaded properties, shifting the tax burden to landlords, snowbirds, and small businesses, like motels. This makes new investment on the beach so expensive that only the very wealthy can afford it.

"Those are the problems presented by Save Our Homes," Geller says. "But having said that, I'm not prepared to revoke it."

Gov. Charlie Crist, who ran as a Jeb Bush Republican but since his election seems to be coming out of the closet as a big-government populist, has proclaimed that he'll go after high property tax rates after slapping down the state's insurance industry. But Geller says he's expecting steep resistance to any changes in Save Our Homes. "I would say that one of the top two or three issues of the regular session will be property tax relief  but whatever we do, the local governments will hate."

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